Maybank Investment Bank is of the view that the total number of bond auctions will rise to 37 (2022: 36) to accommodate a higher supply in 2023. The increase will come primarily from the 5-7y sector (Est +MYR9.5b YoY) while long-duration supply in the 15-30y sector is expected to fall slightly (Est –MYR4.5b YoY).
There is no mention of private placements, a key anchor of demand for a long duration, but Maybank IB thinks PPs schedule could still be added to the auction calendar later or on the auction announcement. 15y sustainability GII 3/38 will see one reopening. Both the existing 10y MGS and 10y GII benchmark bonds will stay in 1H23 and only get replaced in July and October respectively.
The total number of auctions will increase to 37 in 2023, almost evenly split between MGS (18) and GII (19). The gross MGS+GII supply forecast is MYR175b in 2023 (2022: MYR171.5b), translating into an average auction size of MYR4.73b which is little changed from MYR4.76b in 2022. Because of the one additional GII auction, Maybank IB expects the gross issuance of GII to be higher at MYR89b versus MYR86b for MGS
While total gross issuance will be higher in 2023, we project a slightly lower supply of long duration (15-30y sector) at MYR64b which is down from MYR68.5b in 2022 as one additional 30y auction will be more than offset by two reductions in 15y auction. 5y and 7y bonds will contribute to the YoY increase in supply. The banker expects higher supply from both 3-5y and 7-10y sectors at MYR53.5b (2022: MYR49b) and MYR57.5b (2022: MYR54b) respectively. As a share of total supply, Maybank IB expects the following distribution by tenor sector: 31% for 3y5y, 33% for 7y10y and 37% for 15y30y, similar to the 2021 profile.
There is no mention of private placement in the auction calendar 2023 but the house thinks PPs could still be added later or on individual auction announcements, although in recent years PPs are all announced in advance together with the auction calendar. PPs have been the main anchor of demand for 15-30y bonds with a take-up rate of 25-47% on average between 2019 and 2022. Without PPs, the overall BTCs for 15-30y bonds are expected to be lower although the primarily subscriptions that typically enter via PP could still participate through open tender instead.
New Benchmark Bonds 2023 and Sustainability Sukuk:
MGS: Only 20y MGS 10/42 will remain as a benchmark bond throughout 2023. 10y MGS 7/32 will retain its benchmark status in 1H23, but replaced by MGS 11/33 from July. Other tenors will have new benchmarks either through the reopening of existing bonds or new issues – see Figure 9.
GII: Sustainability-labelled 15y GII 3/38 will be reopened for additional issuance and retain its benchmark status in 2023. 30y GII 5/52 will also remain as benchmark bonds in 2023. 10y GII will have a new issue, but only from October which means that the existing 10y GII 10/32 will keep its benchmark status for most of 2023.
Quarterly and Monthly Supply Profile: Issuance progress is expected to be slightly front-loaded as usual: we estimate 52% in 1H23 and 48% in 2H23. On a quarterly basis, 2Q23 is lighter with an estimated net supply of MYR18b compared with
MYR26b in 1Q, MYR28b in 3Q, and MYR22b in 4Q. On a monthly basis, net supply is estimated to be the lowest in March at –MYR6.6b due to large maturity and highest at MYR19b in February which has four auctions and no maturity.
